AFD // 2021 Universal Registration Document

STATEMENT OF NON-FINANCIAL PERFORMANCE 2 Managing the risks and impacts of our action

2.3 Managing the risks and impacts of our action

international World Bank standards), the nature and scope of ex-ante E&S assessments to be produced by the recipients of AFD funding, the level of involvement of AFD’s Environmental and Social Support Division, and the robustness of the E&S monitoring system. In order to determine ex-ante the means to be engaged within this framework, by AFD and recipients of funding, the potential E&S risks of the operations are categorised, distinguishing between four levels of risk for direct financing projects: high risks (category ɸ A), significant risks (category B+), moderate risks (category ɸ B), or low or no risks (category ɸ C) – and three risk levels for projects financed via financial intermediaries (FI): IF portfolio with high risks (FI-A), moderate risks (FI-B) or low risks (FI-C). Thus, for financing granted in 2021, the E&S risks in AFD’s portfolio, respectively in terms of the number of projects and the amounts granted, break down as follows: ❙ Environmental and social risks in AFD’s portfolio in 2021, as a number of projects awarded (foreign States)

AFD Group incorporates corporate social responsibility into its governance system and its activities. As such, it takes measures to assess and manage the environmental and social risks (E&S) of the operations it funds. It implements procedures to identify, prevent or mitigate environmental and social damages, as well as any human rights violations that may arise from these activities. Environmental and social risk management takes place at each stage of the project cycle, from identification to financing approval, to monitoring and ex-post evaluation. This approach is supplemented by the existence of two mechanisms for handling environmental and social complaints, respectively for AFD and Proparco (see below), which help to manage an operational risk. These systems make it possible to contemplate remediation when it has not been possible to avoid, reduce or compensate for negative or unexpected environmental and social impacts by means of the provisions of the E&S management plans for projects funded by AFD or by Proparco. These mechanisms help to strengthen the AFD’s transparency and accountability practices, drawing on the experience of other donors, thanks to exchanges within the IAMnet international network (Independent Accountability Mechanism Network). 2.3.1 AFD’s management of environmental and social risks, and the procedure for managing complaints 2.3.1.1 AFD’s management of environmental and social risks AFD has adopted a policy to control the social and environmental (E&S) risks of the operations it finances (1) . This policy defines the framework and guiding principles applicable to E&S risk management. AFD also has a procedural corpus enabling it to roll out this policy operationally. The E&S risk management policy implemented under development operations financed by AFD is an ongoing, differentiated and proportionate process: P it is ongoing because various actions must be carried out at every stage of the project cycle (identification, feasibility, assessment, decision-making, contractualisation and supervision) and these actions form part of a continuum; P moreover, it is differentiated and proportionate because the nature and scope of the actions to be implemented under the process are adapted to the significance of the E&S risks to be managed. This proportionality principle is rolled out at the different stages of the project cycle and concerns in particular the choice of the applicable E&S regulatory framework (national regulations,

E&S risk

Number of projects

%

A

9

4.02%

B+

50 72 68 13

22.32% 32.14% 30.36%

B C

FI-A FI-B FI-C

5.80% 4.02% 1.34% 100%

9 3

TOTAL

224

❙ Environmental and social risks in AFD’s portfolio in 2021, as amounts granted (foreign States)

E&S risk

Amounts granted (€M)

%

A

531.80

6.94%

B+

2,944.15 1,673.79 1,217.37

38.42% 21.84% 15.89%

B C

FI-A FI-B FI-C

655.02 594.87

8.55% 7.76% 0.61% 100%

46.50

TOTAL

7,663.50

(1) This policy was adopted by AFD’s Board of Directors in July ࣢ 2017; it is available on the AFD website: https://www.afd.fr/fr/politique-de-maitrise-des risques-environnementaux-et-sociaux-lies-aux-operations-financees-par-lafd.

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2021 UNIVERSAL REGISTRATION DOCUMENT